Ponzi Scheme Head Plea Bargains
Posted by Charlie Golestani on Jun 13, 2012 - 9:45:15 AM
BEL AIR—On June 7, a former investment
fund manager registered a guilty plea to federal charges of fraud.
John Farahi, 54, admitted that he issued false promises to investors
to earn their trust, saying he would purchase corporate bonds backed by the Troubled
Asset Relief Program (TARP). Instead, he severely mismanaged the funds.
The scheme began in November 2005, Farahi confessed, with future funds
being used to payoff prior investors and “subsidizing options futures trading,”
and expanding in 2008, with lying to FDIC-insured banks to draw new lines of credit
when funding was scarce. He would lie to banks such as Bank of America and U.S. Bank. New Point Financial Services Inc.,
Farahi’s investment firm in Beverly Hills, was also held culpable in the
apparent Ponzi scheme and the company’s assets were frozen.
The Bel Air Estates resident pleaded guilty to four felony count: Mail and
loan fraud, sale of unregistered securities, and conspiracy to obstruct
Farahi told the U.S. District Court that the sum of losses from the
scheme was more than $7 million; however, prosecutors argued that the amount
was in excess of $20 million.
Farahi further admitted that when wind of the SEC investigation came,
he and his attorney David Tamman among altered documents turned over to the SEC
to support their fallacious activities on three separate occasions.
“Mr. Farahi used a variety of schemes, including the use of false
promises about corporate bonds backed by TARP, to victimize both private
investors and federally insured banks,” said United States Attorney André
Farahi and Tamman were indicted in December 2011.
Farahi faces up to 75 years in federal prison, but under his plea
agreement, would face no more than 10 years in prison. A final sentencing
hearing is set for next year on January 14.
“Mr. Farahi took advantage of investors’ trust, as well as their
money,” said Steven Martinez, Assistant Director in Charge of the FBI’s Los
Angeles Field Office. “Farahi’s admitted crimes resulted in millions of dollars
in losses and should remind those seeking to invest to use extreme caution when
turning over their money in an environment where fraud is all too common.”